March 18, 2024

In a significant development, FINRA has imposed an $850,000 fine on a financial services firm for violations related to its use of social media influencers. This marks the first enforcement action by FINRA concerning a firm's supervision of social media influencer activities.

The case centers around social media posts made by influencers on behalf of the firm, which were found to be neither fair nor balanced. These posts contained exaggerated or misleading claims, including statements about the firm’s margin lending program that misrepresented the terms and risks associated with margin accounts. FINRA found that the firm failed to review or approve these posts before they were published and lacked adequate supervisory systems to ensure compliance with FINRA’s rules on public communications.

The firm’s influencer program was active between January 2020 and April 2023, during which time over 39,400 new accounts were opened through influencer referrals. However, the firm’s failure to properly supervise these communications led to multiple violations of FINRA rules, including those related to communications with the public, supervision, and record-keeping.

As part of the settlement, the firm agreed to remediate the issues identified by FINRA and to implement a supervisory system designed to ensure compliance with regulatory requirements moving forward.

This case underscores the importance of robust supervision and compliance programs, particularly as firms increasingly engage in marketing and customer acquisition through social media platforms.

We are here to provide the guidance and expertise necessary to navigate these complex issues. If you have any questions or concerns regarding your firm's supervision and compliance program, or if you want to ensure that your practices align with regulatory standards, please don't hesitate to reach out to Braeden Anderson, Managing Partner of Anderson P.C., at braeden@andersonlaws.com.

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